Taxing Sodas for a Healthier Economy?

Legislators are floating soda taxes to raise revenue and fight obesity. But most of the time, their proposals fall flat

By Barbara Kiviat Monday, July 12, 2010
    • Bartholomew Cooke for TIME

    (2 of 2)

    Other research leaves room for doubt. While various studies show that a 10% increase in the price of soda leads people to purchase about 10% less of it, that doesn't necessarily mean folks aren't making up for those calories elsewhere. A recent study by researchers at Yale, Emory University and Bates College found that taxes on soda do reduce the amount that children and adolescents drink. But kids then tend to increase their consumption of other caloric drinks like whole milk and fruit juice. Switching out a 140-calorie can of soda for a 225-calorie glass of milk may still be desirable — milk is nutritious; soda isn't — but the substitution illustrates the risk of assuming that reducing soda consumption necessarily reduces weight.

    Health concerns aside, part of the reason taxing soda is becoming so popular is that recession-racked states and cities are desperate for cash. In April, Washington State passed a tax of 2¢ for each 12 oz. of soda. The motivation was less about addressing obesity than closing a $2.8 billion budget gap. In addition to soda, the legislature added or increased taxes on beer, candy, bottled water and cigarettes.

    But either way, the soda industry is out to stop the trend in its tracks. In the first three months of this year, the American Beverage Association spent $5.4 million on lobbying, compared with just $140,000 in the same period last year. When the governor of New York floated the idea of a soda tax, Pepsi responded by saying it might move its headquarters out of the state. In Philadelphia, a 2¢-per-ounce proposal prompted a local bottler to offer the city $10 million to help it out of its fiscal straits. (Philly said no, thanks.)

    And in Washington State, the soda industry's main lobbying group is spending $1.5 million to drum up the 240,000 signatures necessary to force a statewide vote on the just-passed tax. Legislators were worried this might happen. Two years ago, after Maine added a tax on soda, beer and wine to pay for a program that helps people buy health insurance, the beverage-backed group Fed Up with Taxes spent some $5 million collecting signatures to force a referendum and purchasing TV and newspaper ads to convince voters to repeal the tax — which they did.

    How do people feel about soda taxes when they're not being bombarded with a multimillion-dollar ad campaign? The answer is not clear. In April, the Quinnipiac University Polling Institute asked residents of New York State if they supported or opposed a "fat tax" on nondiet sugared soda. Thirty-one percent were in favor, and 66% were opposed. Yet when asked if they would support such a tax if the money raised were used to fund health care, people changed their opinions dramatically, with 48% in favor and just 49% opposed.

    Elected officials are far from unanimously convinced that taxing soda is the best solution. Of the 20-odd proposals on the table this year, most went nowhere. In Washington, the city council wasn't ready to impose a penny-per-ounce tax, though it did remove soda's exemption from the district's 6% sales tax. Council member Harry Thomas Jr. was against the larger per-ounce tax for a litany of reasons, including the fact that soda companies sponsor a lot of events with the city's department of parks and recreation. "It's easy to make this group of people a villain," he says, "but they've helped in many ways."

    Back in the Kansas state senate, Vratil's soda-tax proposal didn't even make it out of committee. But he's not too down about it. "I figured it wouldn't pass in the first year," he says. "It normally takes two or three years to educate legislators." In Washington, Cheh is already gearing up to reintroduce her original measure. "You don't win right away," she says, "but one day we'll look back and say, What took us so long?" Soda taxes may not have passed en masse this year, but there's plenty of reason to think they'll bubble up again.

    3. 1
    4. 2
    5. Next Page